Someone recently asked me about whether it was OK to open a debt settlement company and not work with a back-end provider since the back-end provider takes 50% of the commissions. My answer was I have more questions than answers for you. One question I asked was whether the person already had one or more licenses that authorized him to collect fees from consumers for debt settlement services?
Some states do not have any type of debt settlement (“DS”) licenses but many of the states have new licensing requirements or have had license requirements on the books for some time now. If you are not collecting a fee from the consumer, you may not need a license. That is why many of us work with back-end providers who not only negotiate the debts but also handle the collection of the fee. The back-end providers should have the required licenses or attorney networks in all the states in which they are operating.
As you look more closely into DS licenses, many in the industry talk about Green States and Red States. When talking about Green States, people are referring to the states that are non-attorney states. The Red states are attorney states where the back-end provider is typically an attorney of law firm. These Red states have strict licensing requirements to engage in DS services in these states. Additionally, these Red States typically have restricted the amount and types of fees that can be collected from a consumer in that state.
If you are working with a solid back-end Debt Settlement provider then you will want to know which states are Red states and which states are Green states since the client will be working with an attorney in the Red states but may not be working with an attorney in the green states. This helps strengthen your sales process knowing when you can tell the client that an attorney will be supervising his or her DS program and the negotiation of the debts. In short, Red states are really not bad as compared to Green states but this is just one more area you need to educate yourself as you move forward with establishing your DS services. Keep reading DS guides to expand your knowledge about this business…